Module Eight

Motivation and Reward

System Management
 Learning Objectives

1. Explain the key components of motivation; intensity,

persistence, and direction.
2. Explain the difference between compensation
rewards and non-compensation rewards.
3. Describe the primary financial and non-financial
compensation rewards available to salespeople.
4. Describe salary, commission, and combination pay
plans in terms of their advantages and
disadvantages.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Learning Objectives

5. Explain the fundamental concepts in sales-

expense reimbursement.
6. Discuss issues associated with sales contests,
equal pay for equal work, team compensation,
global compensation, and changing a reward
system.
7. List the guidelines for motivating and rewarding
salespeople.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Setting the Stage

Motivating and Rewarding: Driving

Product Mix Sales at FedEx

1. What were the two primary problems

FedEx faced regarding compensation?
2. How did FedEx resolve the two
problems?

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Motivation

The force within us that activates our behavior.

It is a function of three distinct components,
Intensity, Direction, and Persistence.

Motivation
Motivation

Intensity Direction Persistence

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Motivation - Intensity

Intensity refers to the amount of mental and

physical effort put forth by the salesperson.

Motivation
Motivation

Intensity Direction Persistence

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Motivation - Direction

The extent to which an individual determines

and chooses efforts focused on a particular
goal.

Motivation
Motivation

Intensity Direction Persistence

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Motivation - Persistence

The extent to which the goal-directed effort is

put forth over time.

Motivation
Motivation

Intensity Direction Persistence

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Motivation: Intrinsic vs. Extrinsic

Motivation
Intrinsic Extrinsic
When doing When rewards
the job is such as pay
inherently and formal
motivating recognition act
as motivators

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Two Basic Categories of Rewards

Compensation Rewards:
Those given in return for acceptable
performance or effort. They can include
nonfinancial compensation.

Non-Compensation Rewards:
Those beneficial factors related to the work
situation and well-being of each salesperson.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Optimal Sales Force Reward System

1. Provides an acceptable ratio of costs and sales force

output in volume, profit, or other objectives
2. Encourages specific activities consistent with the
firm's overall, marketing, and sales force objectives
and strategies
3. Attracts and retains competent salespeople, thereby
enhancing long-term customer relationships
4. Allows the kind of adjustments that facilitate
administration of the reward system.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Types of Sales Force Rewards

Motivation
Intrinsic Extrinsic

Sense of Pay
Accomplishment
Job Promotion
Personal Growth security
Recognition
Opportunities

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A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Financial Compensation:
Straight Salary
Advantages
- Salaries are simple to administer
- Planned earnings are easy to project.
- Salaries can provide control over salespeople’s
activities, and reassignments are less of a problem.
- Salaries are useful when substantial development
work is required.
Disadvantages
- Salaries offer little incentive for better performance.
- Salary compression could cause perceptions of
inequity among experiences salespeople.
- Salaries represent fixed overhead.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Financial Compensation:
Straight Commission
Advantages
- Income is linked directly to desired results.
- Straight commission plans offer cost-control
benefits.
Disadvantages
- Straight commission plans contribute little to
company loyalty.
- Problems may also arise if commissions are not
limited by an earnings cap.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Straight Commission: Plan Variations

1. Commission base — volume or profitability

2. Commission rate — constant, progressive, or

a combination

3. Commission splits — between two or more

salespeople or between salespeople and the
employer

4. Commission payout event — when the order

is confirmed, shipped, billed, paid for, or
some combination of these events

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Straight Commission: Rates

Constant rates:
– Rates that remain unchanged over the pay period.
Pay is linked directly to performance.

Progressive rates:
– Rates that increase as salespeople reach pre-
specified targets.

Regressive rates:
– Rates that decline at some predetermined point.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Financial Compensation:
Performance Bonuses
Advantages
- Organization can direct emphasis to what it
considers important in the sales area.
- Bonuses are particularly useful for tying rewards
to accomplishment of objectives.
Disadvantages
- It may be difficult to determine a formula for
calculating bonus achievement if the objective is
expressed in subjective terms.
- If salespeople do not fully support the
established objective, they may not exert
additional effort to accomplish the goal.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Financial Compensation:
Combination Plans
Advantages
- Combination pay plans are flexible.
- They are also useful when the skill levels of the
salesforce vary.
- Combination pay plans are attractive to high-
potential but unproven candidates for sales jobs.
Disadvantages
- Combination pay plans are more complex and
difficult to administer.
- A common criticism of combination pay plans is
that they tend to produce too many salesforce
objectives.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Nonfinancial Compensation

Opportunity for Promotion:

– The ability to move up in an organization along one
or more career paths

Sense of Accomplishment:
– The internal sense of satisfaction from successful
performance
– Sales managers should facilitate salespeople’s
ability to feel this a sense of accomplishment

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Nonfinancial Compensation

Opportunity for Personal Growth:

– Access to programs that allow for personal
development (e.g., tuition reimbursement,
leadership development seminars)

Recognition:
– The informal or formal acknowledgement of a
desired accomplishment

Job Security:
– A sense of being a desired employee that comes
from consistent exceptional performance

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A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Sales Expenses

Controls used in the sales expense

reimbursement process include:
1. A definition of which expenses are reimbursable
2. The establishment of expense budgets
3. The use of allowances for certain expenditures
4. Documentation of expenses to be reimbursed

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Additional Issues in Managing
Salesforce Reward Systems

• Sales Contests
• Equal Pay
• Team Compensation
• Global Considerations
• Changing the Reward System

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Sales Contests:
Recommended Guidelines

1. Minimize potential motivation and morale

problems by allowing multiple winners.
Salespeople should compete against individual
goals and be declared winners if those goals are
met.

2. Recognize that contests will concentrate efforts

in specific areas, often at the temporary neglect
of other areas. Plan accordingly.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Sales Contests:
Recommended Guidelines

3. Consider the positive effects of including

nonselling personnel in sales contests.

4. Use variety as a basic element of sales contests.

Vary timing, duration, themes, and rewards.

5. Ensure that sales contest objectives are clear,

realistically attainable, and quantifiable to allow
performance assessment.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 DOs of Global Compensation

• Do involve reps from key countries

• Do allow local managers to decide the mix
between base and incentive pay
• Do use consistent performance measures
(results paid for) and emphasis on each
measure
• Do allow local countries flexibility and
implementation
• Do use consistent and indication and training
themes worldwide

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 DON’Ts of Global Compensation

• Don’t assign the planned centrally and dictate to

local countries
• Don’t create a similar framework for jobs with
different responsibilities
• Don’t require consistency on every performance
measure within the incentive plan
• Don’t assume cultural differences can be
managed through the incentive plan
• Don’t perceive without the support of senior
sales executives worldwide

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Guidelines for Motivating and
Rewarding Salespeople

1. Recruit and select salespeople whose personal

motives match the requirements and rewards of
the job.

2. Attempt to incorporate the individual needs of

salespeople into motivational programs.

3. Use job design and redesign as motivational

tools

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams
 Guidelines for Motivating and
Rewarding Salespeople

4. Provide adequate job information and assure

proper skill development for the sales force.

5. Concentrate on building the self-esteem of

salespeople.

6. Take a proactive approach to seeking out

motivational problems and sources of
frustration in the salesforce.

Professional Selling: Module 8: Ingram LaForge Avila

A Trust-Based Approach Motivation and Reward System Management Schwepker Jr. Williams